Examining Earnings, Higher Education Attainment, and the Use of Soft Skills Among U.S. Workers

• In Event: 34.062 - What Skills Are Key to Labor Force Success? Results From the Program for the International Assessment of Adult Competencies

Abstract

Objectives
This paper examines the relationship between higher education and the use of soft skills among U.S. workers. In the 21st century knowledge economy, policymakers argue that there is a “skills gap” between what employers are looking for and what college graduates are prepared to do when they enter the workplace (e.g., The Economist Intelligence Unit, 2014). In addition to “foundational skills,” such as numeracy, employers often state that they are looking for so-called soft skills such as collaboration and teamwork, communication, and skills needed to manage multiple tasks or priorities (The Economist Intelligence Unit, 2014).

In this paper, the following three research questions will be addressed: (a) Do college graduates report using soft skills more frequently at work? (b) Do higher education attainment and soft skills have independent, positive relationships with earnings? (c) When examining earnings among U.S. workers, is there a statistically significant interaction between higher education attainment and use of soft skills? We analyze data from the Program for the International Assessment of Adult Competencies (PIAAC) and present findings using ordinary least squares estimation.

Conceptual Framework
In this paper, we take a human capital approach to examining higher education attainment, the use of soft skills, and earnings (Becker, 1964; Heckman & Rubinstein, 2001; Heckman, Stixrud, & Urza, 2006). Human capital theory suggests that employers use earnings to reward multiple types of skills or abilities that employees bring to the workplace. Traditionally, educational credentials have been considered as signals or proxies of soft skills (Becker 1964). However, in more recent work, economists have sought to directly quantify cognitive ability and soft skills (Heckman & Rubinstein, 2001; Heckman, Stixrud, & Urza, 2006).

Methods
To address the first research question, we examine the bivariate relationship between higher education and use of soft skills among the PIAAC sample of workers. To address the second research question, we estimate ordinary least squares regression models testing whether higher education attainment and the soft skills measures have independent effects on wages, after controlling for a variety of background and experience characteristics. In the final set of models, we include interaction terms between higher education attainment and each of the soft skill variables.

Data
We use variables included in the PIAAC dataset. The dependent variable is the logarithm of reported monthly salary, including bonuses for wage and salary earners. The key independent variables of interest measure higher education attainment (1 = four-year university degree; 0 = less than four-year degree). The four soft skills variables are standardized and measure Readiness to Learn, Influence, Planning, and Task Discretion. The sample includes 2,482 working adults in PIAAC.

Results
We find that workers with four-year university degrees report using soft skills more frequently at work. Both higher education attainment and soft skills have positive, statistically significant relationships with earnings, after controlling for foundational skills (numeracy) and work experience. In our final model estimating earnings, there is a statistically significant interaction between higher education attainment and task discretion. In the full paper, we discuss implications of our findings.

Authors

• Huacong Liu, University of Hamburg

• Frank Joseph Fernandez, University of Houston